Marks v. Thompson

• Decision Date: 15 November 1972
• Docket Number: No. 9,9
• Citation: 282 N.C. 174,192 S.E.2d 311
• Parties: James L. MARKS, Jr. v. Lella S. THOMPSON.
• Court: North Carolina Supreme Court

Page 311

192 S.E.2d 311

282 N.C. 174

James L. MARKS, Jr. v. Lella S. THOMPSON.

No. 9.

Supreme Court of North Carolina.

Nov. 15, 1972.

Maupin, Taylor & Ellis by William W. Taylor, Jr., and Purrington & Purrington by A. L. Purrington, Jr., Raleigh, for defendant appellant.

Herman Wolff, Jr., and Yarborough, Blanchard, Tucker & Denson by Charles F. Blanchard, Raleigh, for plaintiff appellee.

BOBBITT, Chief Justice.

The Rules of Civil Procedure, G.S. § 1A--1, went into effect on 1 January 1970. All provisions of Rule 26(b), prior to the 1971 amendment, are quoted below.

'(b) Scope of examination.--Unless otherwise ordered by the judge as provided by Rule 30(b) or (d), the deponent may be examined (regarding any matter, not privileged, which is relevant to the subject matter (involved) in the pending action, whether it relates to the claim or defense of the examining party or to the claim or defense of any other party, including the existence, description, nature, custody, condition and location of any books, documents or other tangible things and the identity and location of persons having knowledge of relevant facts. It is not ground for objection that the testimony will be inadmissible at the trial if the testimony sought appears reasonably calculated to lead to the discovery of admissible evidence) nor is it ground for objection that the examining party has knowledge of the matters as to which testimony is sought. But the deponent shall not be required to produce or submit for inspection any writing obtained or prepared by the adverse party, his attorney, surety, indemnitor, or agent in anticipation of litigation or in preparation for trial unless the judge otherwise orders on the ground that a denial of production or inspection will result in an injustice or undue hardship; but, in no event shall the deponent be required to produce or submit for inspection any part of a writing which reflects an attorney's mental impressions, conclusions, opinions or legal theories, or except as provided in Rule 35, the conclusions of an expert.'

Chapter 750, Session Laws of 1971, entitled 'An Act to Allow Discovery of Insurance Information in Negligence Actions,' became effective upon its ratification on 5 July 1971. This 1971 Act amended Rule 26(b) by adding a second (unnumbered) paragraph at the end thereof. The added paragraph is quoted below.

'Insurance Agreements.--A party may obtain discovery of the existence and contends of any insurance agreement under which any person carrying on an insurance business may be liable to satisfy part or all of a judgment which may be entered in the action or to indemnify or reimburse for payments made to satisfy the judgment. Information concerning the insurance agreement is not by reason of disclosure admissible in evidence at trial. For purposes of this paragraph, an application for insurance shall not be treated as part of an insurance agreement.'

The provisions of the portion of our Rule 26(b) shown above within brackets were identical with all provisions of Rule 26(b) of the Federal Rules of Civil Procedure prior to the 1970 amendment of Federal Rule 26(b), except that our Rule 26(b) did not contain the word 'involved' shown in parentheses. Fed.R.Civ.P. 26(b), 28 U.S.C.A. (1958).

Federal decisions based on Federal Rule 26(b) prior to the 1970 amendment, and decisions based on similar state rules of procedure, were in conflict as to whether the facts relating to the existence and amount of automobile liability insurance were 'relevant to the subject matter in the pending action' and proper subject of inquiry in discovery proceedings. Decisions tending to support their respective positions are cited in the majority and dissenting opinions in the four to three decision of the Supreme Court of Nebraska in Mecke v. Bahr, 177 Neb. 584, 129 N.W.2d 573 (1964). In holding that the defendant's objections to the plaintiff's interrogatories should have been sustained, the majority opinion took the view that '(t)he subject matter is the charge of negligence against the defendant which caused the injury to the plaintiff,' and that disclosure was not required unless the evidence sought was relevant to a determination of the issues raised by the pleadings. Id. at 589, 129 N.W.2d at 577. The dissenting opinion took the view that '(t)he term 'subject matter' of an action embrace(d) a much broader range of discovery than 'admissible evidence' as to liability issues only,' and included facts relevant to the disposition of litigation through settlement negotiations. Id. at 592, 129 N.W.2d at 578. For other decisions and commentaries pertinent to the conflicting views, see 8 C. Wright & A. Miller, Federal Practice and Procedure, § 2010 (1970); Fournier, Pre-Trial Discovery of Insurance Coverage and Limits, 28 Ford.L.Rev. 215 (1959); Jenkins, Discovery of Automobile Insurance Limits: Quillets of the Law, 14 Kan.L.Rev. 59 (1965); Williams, Discovery of Dollar Limits in Liability Policies in Automobile Tort Cases, 10 Ala.L.Rev. 355 (1958); Comment, Discovery of Insurance Coverage: Hazy Frontier of the Discovery Process, 35 Tenn.L.Rev. 35 (1967); Note, 45 N.C.L.Rev. 492 (1967); Annot. 13 A.L.R.3d 822 (1967).

In 1970 the controversy in the federal courts was settled when amendments to certain of the Federal Rules, including the amendment of Rule 26(b) to permit discovery of insurance agreements, were adopted by the Supreme Court of the United States and transmitted in Congress on 30 March 1970, in accordance with 28 U.S.C.A. § 2072. These amendments went into effect on 1 July 1970. 398 U.S. 978--979. Mr. Justice Black and Mr. Justice Douglas disapproved 'of the Amendments to the Federal Rules of Civil Procedure relating to Discovery' and dissented 'from the action of the Court in transmitting them to the Congress.' Id. at 979.

The pertinent portions of Federal Rule 26(b) as amended in 1970 are quoted below.

'(b) Scope of discovery.--Unless otherwise limited by order of the court in accordance with these rules, the scope of discovery is as follows:

'(1) In general.--Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party, including the existence, description, nature, custody, condition and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of any discoverable matter. It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence.

'(2) Insurance agreements.--A party may obtain discovery of the existence and contents of any insurance agreement under which any person carrying on an insurance business may be liable to satisfy part or all of a judgment which may be entered in the action or to indemnify or reimburse for payments made to satisfy the judgment. Information concerning the insurance agreement is not by reason of disclosure admissible in evidence at trial. For purposes of this paragraph, an application for insurance shall not be treated as part of an insurance agreement.' Fed.R.Civ.P. 26(b); 398 U.S. at 982--983.

In proposing the 1970 amendments to the Federal Rules, the Advisory Committee stated: 'New provisions are made and existing provisions changed affecting the scope of discovery: (1) The contents of insurance policies are made discoverable (Rule 26(b)(2)).' 4, F.R.D. 487.

After discussing and citing decisions and articles pertinent to the above conflict concerning Rule 26(b), the Advisory Committee included in its explanation of the proposed amendment the following:

'The amendment resolves this issue in favor of disclosure. Most of the decisions denying discovery, some explicitly, reason from the text of Rule 26(b) that it permits discovery only of matters which will be admissible in evidence or appear reasonably calculated to lead to such evidence; they avoid considerations of policy, regarding them as foreclosed. See Bisserier v. Manning Supra. (207 F.Supp. 476 (D.N.J. 1962).) Some note also that facts about a defendant's financial status are not discoverable as such, prior to judgment with execution unsatisfied, and fear that, if courts hold insurance coverage discoverable, they must extend the principle to other aspects of the defendant's financial status. The cases favoring disclosure rely heavily on the practical significance of insurance in the decisions lawyers make about settlement and trial preparation. In Clauss v. Danker, 264 F.Supp. 246 (S.D.N.Y.1967), the court held that the rules forbid disclosure but called for an amendment to permit it.

'Disclosure of insurance coverage will enable counsel for both sides to make the same realistic appraisal of the case, so that settlement and litigation strategy are based on knowledge and not speculation. It will conduce to settlement and avoid protracted litigation in some cases, though in others it may have an opposite effect. The amendment is limited to insurance coverage, which should be distinguished from any other facts concerning defendant's financial status (1) because insurance is an asset created specifically to satisfy the claim; (2) because the insurance company ordinarily controls the litigation; (3) because information about coverage is available only from defendant or his insurer; and (4) because disclosure does not involve a significant invasion of privacy.' 48 F.R.D. at 488--489.

Since the wording of the 1971 amendment of our Rule 26(b) and that of the 1970 amendment to Federal Rule 26(b) are identical, the only reasonable inference is that they were adopted for the same reasons and were intended to accomplish the same result.

The 1970 amendment to Federal Rule 26(b) relating to 'Insurance Agreements'...